Qantas pays $66m to plug superannuation shortfall

By Dan Oakes

4 April 2009 — 12:00am

QANTAS has topped up its superannuation scheme with $66 million to cover a shortfall caused by the global economic crisis.

The company announced yesterday that the injection of funds into the defined benefit division of the superannuation plan would be spread over three years, and that it reflected "the adverse performance of financial markets over recent months".

The move addresses concerns that Qantas could be forced to inject an estimated $283 million into its super scheme over the next year because of a shortfall caused by investment losses.

In the most detailed analysis yet of the airline's likely obligations, Merrill Lynch recently estimated that investment losses have cost Qantas's defined benefit pension plan $394 million since last June, which has turned a $296 million surplus into a $98 million deficit.

The broker said the fund's obligations to its members would also rise by $185 million, resulting in a net cost to Qantas of $283 million over the next year.

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In its statement yesterday Qantas said its overall superannuation plan had $5 billion in assets, and members' benefits would continue to be met.

The new funding plan had been agreed on with the plan's trustee and confirmation had been provided to the Australian Prudential Regulation Authority, it said.

Under its defined benefit scheme, more than 13,000 former and present Qantas workers, mainly pilots and skilled technicians, are guaranteed fixed payments when they retire.

Defined benefits funds were largely phased out in the 1990s as companies sought to shift the risk of falling returns on investment onto employees. Payments to members are usually determined by the number of years they worked for the company and their final salary.

The funds account for about 8 per cent of total superannuation assets in Australia, potentially creating headaches for some of Australia's largest companies in a bear market.

In October Telstra pumped $110 million into its fund. Other companies facing shortfalls include the Commonwealth Bank, Tabcorp, Rio Tinto and BlueScope Steel.